CA expects the cost-cutting initiative to result in $200m in annual savings, but the company hasn’t yet adjusted its fiscal 2007 outlook to reflect restructuring costs or the previously announced $2bn share buyback that is just beginning.
As for CA’s fiscal Q1, revenue was up 5% to $956m, driven mostly by growth in its main subscription business and professional services division. But higher costs for the quarter, such as personnel costs from acquisitions, compensation expenses, and charges from its last restructuring, dragged down net income to $35m, or $0.06 per share, from $97m, or $0.16 a share, for the same period last year.
Operating income came in at $0.17 per share, ahead of analysts’ expectation of $0.13 per share on revenue of $932.3m, according to Thomson Financial.
In addition to the job cuts, half of which will take place in North America, the restructuring plan includes some facility closures and other unannounced initiatives. The plan is expected to be complete by late FY2008, the company said. The restructuring will result in about $200m in pre-tax charges, and CA plans to take the bulk of the charges in the next two quarters.
CA is kicking off the first part of its $2bn share buyback with a tender offer for $1bn in stock, using both available cash and bank borrowing. The company said it is still looking into how to execute the second part of the buyback but expects to complete all repurchasing by the end of FY2007.
The company said it would slow down its pace of acquisitions in the next 12 to 18 months, as the buyback will restrict its available cash. The company added that it can’t find any good acquisition targets currently in the market, but that the landscape may very well change in 18 months and it will evaluate new deals at that time.
CA reported after market close, and shares were up about 3% to $22.32 in after-hours trading.
